Declining sales graph puts brakes on bike manufacturing venture

Kolkata: West Bengal’s first proposed motorcycle making facility has run into rough weather in a setback to the state government’s ambitions for high-profile investments in manufacturing, after an overseas partner decided to go slow citing a sluggish market for bikes.

Zongshen Industrial Group Co. Ltd, the Chinese technology partner of Mahabharat Motors Manufacturing Co. Pvt. Ltd, doesn’t see the market as being lucrative, according to one of the founders of Mahabharat Motors.

“For Zongshen, it is important that they enter the market when they can make money,” said Prasoon Mukherjee, chairman of Jakarta-based Universal Success, which has an unspecified equity interest in Mahabharat Motors.

The company is a joint venture between Indonesia’s Salim Group and Mukherjee’s Universal Success.

In Indonesia, Salim manufactures two-wheelers in a joint venture with Japan’s Suzuki Motor Corp. under the Indomobile brand.

“They manufacture five million two-wheelers in a year so finding a technology partner won’t be difficult,” Mukherjee said. “We couldn’t rope in Suzuki for Mahabharat as they already have an independent presence in India,” he said.

“Normally , before a product such as a motorcycle is launched, we do five-seven years of market study. We started doing our market study in 2007 to find out what is going to work—after the joint venture started—and we found that the motorcycle market in India had dipped by 25-30% from the time we thought of the project. Sales of all big players are falling... In hindsight, we probably should have done more homework,” said Mukherjee.

Two-wheeler sales in India have been falling for more than a year now and, in a bid to arrest that, finance minister P. Chidambaram cut excise duty on bikes by four percentage points in the Budget last week. But, the lack of cheap credit may offset the tax cuts, say motorbike makers.

An emailed questionnaire to Zhongshen remained unanswered whereas Salim’s chief executive directed all queries to Mukherjee.

Mahabharat Motors had previously said its motorcycles would hit the roads by September. But, that’s not happening. The launch has been pushed to “the first quarter of 2009-10”, Mukherjee said.

“We hope to be ready with the product in 12-14 months,” he said, adding that there wouldn’t be any significant cost overrun due to the delay. That’s even though the prices of building materials and steel has been steadily gaining.

In February 2006, Bengal chief minister Buddhadeb Bhattacharjee had flagged off the project by laying the foundation stone at the factory site. Mahabharat Motors was expected to have a capacity to produce 500,000 motorcycles a year and create up to 6,000 jobs. The owners had then said they would invest up to $30 million or Rs117 crore, in the venture.

There are other problems. Bengal had allotted a 65-acre plot to the company to build its factory, 40km from Kolkata, but even after two years, the plot has not been formally leased out to Mahabharat Motors.

“We have given them right to possess and start construction. So, it’s not an issue,” said Bengal’s commerce and industries secretary Sabyasachi Sen. Mukherjee, too, doesn’t seem worried. “Even if there’s an issue, it’s between arms of the government of West Bengal.’’

At the factory site off National Highway 6, where construction started late last year, a couple of trucks and tractors crawl along while some 100-odd workers dump fly ash into the earth to avoid the site from flooding.

Meanwhile, the state government, too, doesn’t seem fazed by the ongoing delay.

“We appreciate it’s a difficult market. They have to decide which segment they want to get into. Even the other company that assembles motorcycles in this state doesn’t seem to be doing too well, isn’t it? So, let’s see—let’s wait for some more time,” Sen said.

Sen was referring to Xenitis Group’s motorcycle business. The group, which also manufactures personal computers in Bengal, refused to comment on Sen’s observation. The government has turned down its request for allotment of 100 acres more. “They had asked for more land to build a vendor park, but we have said no because a contiguous plot is not available,” Sen said.